The Reserve Bank Of India is India’s central banking institution which controls the monetary policy of the Indian Rupee. It commenced its operations on 1 April 1935 during the British rule in accordance with the provisions of the Reserve Bank Of India.
A rate cut after two years have bought a smile on the faces of both the ordinary people and business houses. Let’s analyse how this rate cut will create an impact :
1) EMI’s to come down with a 25 basis point cut in home loan rate by Rs. 842 on a Rs. 50 lakh loan tenure for 20 years.
2) This is the first rate cut since March 2013, and bankers believe that there is more to come and that interest rates could come down by 100 basis points through 2015.
3) Banks will gain as the value of their bond portfolio rises. Companies will get stronger as interest rates will fall.
4) Corporates to benefit too as loans are to get cheaper and hence the expected disbursement of those will increase.
5) Improved market sentiment will enable companies to raise their equity, enhance prospects for government divestment.
6) With more consumer spending and easy availability of loans – corporate as well as consumer – the economic growth will get momentum.
India’s GDP is expected to grow at 6.4% in 2015 and is likely to catch up with China in 2016 and 2017.